US non-farm payrolls rose by 223,000 in June

Improvement in the US labour market was considerably more restrained in June than analysts had been expecting.

US non-farm payrolls increased by 223,000 in June, coming in below economists´ forecasts for a rise of 233,000. As well, readings for April and may were revised lower by a combined 60,000.

Goods producing industries generated just 1,000 new positions last month while job growth in services slowed to a 222,000 pace after accelerating to a 246,000 clip in May.

On a more positive note, the unemployment rate moved lower by two tenths of a percentage point to 5.3% (consensus: 5.4%). However, that was partly due to a three tenths of a percentage point drop in the labour force participation rate to 62.6% - its lowest since October of 1977.

"September rate hike remains very much in play"

Furthermore, the rate of expansion in average hourly earnings was flat in month-on-month terms (consensus: 0.2%).

The index of aggregate weekly hours improved 0.2% to 103.4.

The length of the average work week was unchanged at 34.5 hours, as expected by analysts.

As of 13:53 the yield on the benchmark 10-year US Treasury note was edging lower by two basis points to 2.40%. Gilt, bund and periphery bond yields of the same maturity were heading higher.

"Overall, this cannot be regarded as a strong release, and will dampen market thoughts of Fed September “lift-off”. But we feel strongly that this is/would be a mistake, as this is very volatile data, and we think it is more likely that the payrolls data eventually swings behind other high frequency labour indicators in coming months, which are running quite strong, than the other way around," said Bill Hubard, chief economist at Bankor.

"The lack of a sustained acceleration in wage growth could prompt the Fed to keep pushing back the timing of the first rate hike. But with other measures suggesting that wage growth has risen and the unemployment rate on a sustained downward trend, a September rate hike remains very much in play," Paul Dales, senior US economist at Capital Economics, wrote in a research report e-mailed to clients.

"Altogether, we do not view this report as significantly shifting opinions within the Fed about the timing of the first rate hike. We continue to look for the first rate hike in September, though lingering uncertainty about the strength of incoming data and developments in the external environment could cause the Fed to delay the rate hike cycle," economists at Barclays said.